Makers march on Osborne

A week from the Budget, six global power manufacturers have restated their call to the Chancellor to set a long term, 2030 target in the Energy Bill. They argue that billions of pounds of investment and jobs are at risk. Take this case: political uncertainty has stayed Siemens plans for a new 700-job turbine factory on Hull docks, in a city where 14 claimants are chasing every vacancy. “Postponing the 2030 target decision until 2016 creates an entirely avoidable political risk,” the manufacturers say.

Renewables are the yellow band in the UK’s energy mix, below. The graph is taken from DECC’s “gas generation strategy”. The yellow renewables band expands every year to 2020 but then growth stops dead. This is the “cliff” explaining why Alstom UK, Gamesa, Doosan, Areva, Vestas and Mitsubishi Power Systems Investors are shy of investing in multi-billion, multi-year projects without a new, 2030 carbon reduction target.

The investors argue that projects can take 4-6 years from investment decision to construction and operation. “We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines. Supply chain investment decisions depend on reasonable assurance for manufacturers that a production facility to be constructed during this decade, costing hundreds of millions of pounds, will have an adequate market for its products well into the 2020s.”

Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs. This is not in keeping with the Government’s aspirations for the UK to be the global leader in low carbon technologies such as offshore wind and marine.

The current framework will not drive investment at the pace and scale successive Governments have sought to encourage. The 2050 target covers the whole economy, not just power generation, and is too distant to drive significant investment over the next 5-10 years, while recent disagreements within the Coalition have created doubts about the long-term durability of the carbon budgets.

The companies are multinational technology leaders in low carbon power generation equipment and associated services. Their interests span high efficiency gas-fired generation, clean coal, carbon capture, nuclear and renewables. They employ around 12,500 people in the UK.

Written by Philip Pearson

Philip is a former Senior Policy Officer in the TUC’s Economic & Social Affairs Department, working on issues around climate change, energy and transport.